Infrastructure Financing through Islamic
Finance in the Islamic Countries
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4.5. Sudan
4.5.1. Sudanese Financial Sector and Islamic Finance: An Overview
Although the Islamic finance and banking industry started in Sudan during the Economic
Openness Period (EOP) which took place over 1976-1983, the Islamization of the whole
banking and financial system was completed in two stages. The first was the Stage of
Declaration and Starting of Islamic Banking which started in October 1984 and continued until
the end of 1988. During this stage, the Civil Transactions Act of 1984 was enacted after the
declaration of Shari’ah law in 1983. Consequently, the Central Bank of Sudan (CBOS) issued the
circular in December 1984 that prohibited interest rates and instructed all banks to convert
from conventional banking to Islamic banking immediately (Abushora et. al 2006). During this
period, the whole banking system completely transformed to Islamic and many private Islamic
financial institutions entered the market. The second Stage of Deepening Islamic Financial
System took place during the period 1989-2003 in parallel with the Sudan Government’s
Privatization Policy, often termed The Economic Liberalization Policy. This stage witnessed the
Islamization of insurance companies, the merging of government banks, the liquidation of
private banks, and the emergence of Islamic investment banks. The period also witnessed the
emergence of the Khartoum Stock Exchange (KSE) in 1994 immediately after the issuance of
the KSE Act of 1994 (Abushora et. al 2006). Soon after the KSE Act of 1994 was issued, the
primary stock market started operations in the same year and the secondary stock market
started in 1995 with 34 listed companies (Al-Sayed, 2011).
Different stakeholders and institutions in the Sudanese financial sector include Islamic banks;
the Electronic Banking Services Company; the Credit and Information Scoring Agency; the
Khartoum Stock Exchange; and nonbanking financial institutions such as Islamic insurance
companies, Investment brokerage companies, the Deposits Guarantee Fund, the Inter-Banks
Liquidity Management Fund, investment institutions, exchange bureaus, Ijarah companies and
microfinance institutions. The status of Sudan’s financial sector relative to the averages of OIC
countries and the African region is shown in Chart 4.5.1. The overall financial development
index of Sudan (0.11) is lower than the corresponding indices for OIC (0.23) and Africa (0.16),
implying a relatively underdeveloped financial sector. The same trends can be seen in the case
of the financial institutions index (0.21) and the financial markets index which for Sudan is
zero.